Measuring retirement security -- or retirement income adequacy -- is an extremely important topic. The May 2012 EBRI Notes article provided updates for the previously published EBRI Retirement Readiness Ratings™ as well as the average Retirement Savings Shortfalls (RSS). This paper provides sensitivity analysis on the Retirement Readiness Ratings™ by giving additional information on the percentage of the at-risk population that is relatively close to having adequate financial resources for retirement income adequacy. It also provides more detailed analysis on the distribution of the RSS. Unlike previous analyses, this paper focuses on the Gen Xer cohort (born between 1965-1974) in an attempt to assess the impact that eligibility for participation in a 401(k) plan has on these values. The dollar value of retirement savings shortfalls for Gen Xers varies considerably with the number of future years of eligibility for 401(k) plans, particularly for those in the highest severity category (simulated to have a shortfall of $200,000 or more): 13 percent of those with no future years of 401(k) eligibility have shortfalls in this range vs. only 3 percent for those with 20 or more years. Future eligibility for 401(k) plans makes a significant difference in reducing the percentage of households with shortfalls of $200,000 or more for all gender/family status combinations, but single females experience the largest absolute reduction in the percentage of those with shortfalls in this range. This paper also provides a comparative analysis of the importance of nursing home and home health care costs on retirement income adequacy. Figures 1-6 in the paper are based on the EBRI Retirement Security Projection Model® (RSPM) which simulates 1,000 alternative retirement paths for each household to explicitly model investment, longevity, and stochastic health care risks (i.e., nursing home and home health care costs). Figure 7 modifies RSPM by completely eliminating the nursing home and home health care risks to illustrate the extent of the errors introduced in models that ignore these risks. The PDF for the above title, published in the June 2012 issue of EBRI Notes, also contains the fulltext of another June 2012 EBRI Notes article abstracted on SSRN: “Use of Health Care Services and Access Issues by Type of Health Plan: Findings from the EBRI/MGA Consumer Engagement in Health Care Survey.”

Using the Japanese Study of Aging and Retirement (JSTAR), a new Japanese panel survey of people age 50 or older, we find that many Japanese in their early 50s - compared with those in their late 50s and early 60s - expect their level of public pension benefits to decline. We find that recent pension reform, which raised the pensionable age, affected people by increasing the age when they expect to claim their benefits by almost the exact same amount for all. The reform decreases their expectations for public pension benefits, although this effect is not necessarily significant. We also find evidence that individuals’ anxiety about the public pension program’s future induces an increase in their private savings.

Are early retiree health benefits (RHBs) a form of deferred compensation that binds workers to an employer? Most employers who offer RHBs offer them only to workers who have 10 or more years of tenure with the firm and have reached age 55. Accordingly, workers in firms offering RHBs have an incentive to stay with a firm in the years before they attain eligibility for RHBs, and a greater incentive than otherwise to retire thereafter. We test for the existence of such a pattern of incentives by examining the age-specific relationship between workers’ eligibility for RHBs and retirement. The findings suggest that workers in RHB-offering firms are less likely to retire at ages 50 and 51 than similar workers in firms that do not offer RHBs. Also, RHB-eligible workers aged 60 and 61 are more likely to retire than similar RHB-ineligible workers. Such a pattern is consistent with RHBs acting as part of a delayed-payment contract of the kind described by Lazear (1979, 1981).

In 1997, Hungary and Poland led Central Europe in partially privatizing their national pension systems, diverting a portion of public pension contributions to privately‐managed individual investment accounts. In the aftermath of the global economic crisis, both governments retrenched these second‐tier schemes: Hungary (December 2010), by ceasing to fund the accounts and recouping most workers' existing balances; and Poland (April 2011), by reducing the diversion of contributions to the second tier. The factors that drove these retrenchments are traced to the original 1997 second‐tier designs, which omitted key specifications related to financing the accounts, private benefit design, and the regulation of private management fees. While both governments tried to compensate for the missing design specifications during implementation, the results were limited. By reducing investment returns and raising borrowing costs, the global economic crisis brought the problems to a head. The conclusion highlights some outstanding issues whose resolution will shape the retrenchments' long‐term impacts.

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As per Christine Dugas at USA Today, this particular raise will have an effect on around 55 million Social Security recipients and another 8 million citizens who collect Supplemental Security Income (SSI). While not as huge as 2009’s whopping 5.8% increase, still it drops within the 2.3-4.1 percent range that other such raises have fallen years back. In tangible dollars, the present average monthly Social Security check will go up from $1,082 to $1,121. More in this post.

About me

I am a Resident Scholar at the American Enterprise Institute in Washington, where my work focuses on Social Security policy. Previously I held several positions within the Social Security Administration, including Deputy Commissioner for Policy and principal Deputy Commissioner. Prior to that I was a Social Security Analyst at the Cato Institute. In 2005 I worked on Social Security reform at the White House National Economic Council, and in 2001 I was on the staff of the President's Commission to Strengthen Social Security. My Bachelor's degree is from the Queen's University of Belfast, Northern Ireland. I have Master's degrees from Cambridge University and the University of London and a Ph.D. from the London School of Economics and Political Science. I can be contacted at andrew.biggs @ aei.org.